Table of Contents

Contents Page No.

1.0 Executive Summary

1.1 Objectives

1.2 Mission

1.3 Keys to Success

2.0 Company Details

2.1 Company Ownership

2.2 Start-up Summary

2.3 Company Locations and Facilities

3.0 Products

3.1 Product Description

3.2 Competitive Comparison

3.3 Future Products

4.0 Market Analysis Summary

4.1 Market Segmentation

4.2 Target Market Segment Strategy

4.2.1 Market Trends

4.2.2 Market Growth

4.2.3 Market Needs

4.3 Industry Analysis

4.3.1 Competition and Buying Patterns

4.3.2 Main Competitors

4.3.3 Industry Participants

5.0 Strategy and Implementation Summary

5.1 Strategy Pyramid

5.2 Value Proposition

5.3 Competitive Edge

5.4 Marketing Strategy

5.4.1 Promotion Strategy

5.4.2 Distribution Strategy

5.4.3 Marketing Programs

1

5.4.4 Positioning Statement

5.4.5 Pricing Strategy

5.5 Sales Strategy

5.5.1 Sales Forecast

5.5.2 Sales Programs

5.6 Strategic Alliances

5.7 Milestones

6.0 Management Summary

6.1 Management Team

6.2 Management Team Gaps

6.3 Organizational Structure

6.4 Personnel Plan

7.0 Financial Plan

7.1 Important Assumptions

7.2 Key Financial Indicators

7.3 Break-even Analysis

7.4 Projected Profit and Loss

7.5 Projected Balance Sheet

2

Hi-Value Beverage Shop(Hi-VB Shop)

1.0 Executive Summary

Hi-VB Shop is a locally owned beverage outlet chain that will be positioned as

pioneer in “speciality beverage shop” concept. It is beverage retailer system that will

provide variety of beverages in a convenient manner with fun packaging and

atmosphere. It is unique in Pakistan and is the answer to an increasing demand for

nourishing beverages inside a market place. Hi-VB Shop will select farm fresh raw

material right from farmer’s fields and orchids to keep the nutritional value of its

products intact.

The Hi-VB Shop will focus on commuter, someone travelling to/from work, out for

shopping, delivering goods or services, or just out for a drive. The Hi-VB Shop will

penetrate the market by setting up shops in the most logical and accessible locations.

It will entice commuters to quench their thirst with freshly expelled sugarcane juice,

pure fruit ciders and juices, fruit cocktail drinks, fruit slushes, specially blended fruit

shakes, cold coffee and many more in Hi-VB Shop’s signature pitchers and

disposable glasses. During chilly season, Hi-VB Shop will offer specialty coffees,

blended teas, and other custom hot beverages. The fresh-cut fries, vegetable rolls,

chicken rolls and selection of unique dipping sauces will also garland the venues.

The business founders are management graduate and professional food technologists

with experience in fruit processing industry. Thus adequate management of quality

products, served in hygienic manner with firm inventory control can be forecasted.

The Hi-VB shop’s financial picture is quite promising. Since it is operating a cash

business, the initial cost is significantly less than many start-ups these days. The

process is labour intensive and Hi-VB shop recognizes that a higher level of talent is

required. The financial investment in its employees will be one of the distinctive

features of Hi-VB Shop. The other area of investment focus is highly efficient and

hygienically designed special juice expellers, drink makers, ice machines and utensils.

There will be minimum inventory on hand so as to keep the product fresh and to take

advantage of price drops, when and if they should occur. The Hi-VB Shop anticipates

the initial investments of Rs. 1200 thousands to carry it as capital contributions from

shareholders that would allow the company to open one facility in a busy market

place of a major city as ‘market tester’. This will mean growing a bit more slowly

than might be otherwise possible, but it will be a solid, financially-sound growth

based on customer request and product demand. The fear is that competitors would

rise up and establish a foothold on other markets before or in the midst of the arrival

of Hi-VB Shop, causing a potential for a drain on revenues. Knowing these risks and

planning for them gives Hi-VB Shop the edge needed to make this scenario work.

It is planed to add up two more shops in the network till the end of year two, through

equity contributed by investors and earning retained. The balance sheet estimates a

net worth of over Rs. 3.5 million and earnings of about Rs. 3 million, based on 5

shops and a kiosk at termination of the third year.

1.1. Objectives

To increase the shop number to 5 at the end of year three with gross margin

exceeding 40%.

To sale pure, nutritious and natural products.

To make Hi-VB Shop a destination spot for mall-goers.

1.2. Mission

Hi-VB Shop will sell pure beverage articles with all nutritional value intact. Our main

focus will be serving high-quality beverages and food at a great value.

We want our customers to have the total tastier experience when visiting our outlets.

We will strive to be a premier local beverage brand in the local marketplace.

1.3. Keys to Success

To succeed in this business we must:

Know the strength of traditional beverages e.g. sugar cane juice (rau) and

lemon drink (skanjbin) to present in innovative manner as attraction for

customers.

Develop the image of Hi-VB Shop as offering a substitute of harmful cola

beverages and junk snacks at competitive prices.

Create a unique, innovative, entertaining beverage pool that will help us to

become a pioneer in our class of business.

Control costs at all times, in all areas and implement a conservative approach

to growth policy.

Encourage the two most important values in fast food business: brand and

image, as these two ingredients are a couple of main drivers in marketing

communications.

Hi-VB Shop is not just a business but a combination of tradition and technology,

leading its customers back to their roots through innovation based tastier experience.

2.0. Company Details

2.1 Company Ownership

The Hi-VB is a partnership firm. The equity will be shared by four partners, already

principally agreed.

2.2 Start-up Summary

The Hi-VB's start-up funds will be used to build the first two facilities, pay deposits,

and provide capital for six months of operating expenses, initial inventory and other

one-time expenses. The Hi-VB anticipates the need for operating capital for the first

few months of operation.

2.3 Company Locations and Facilities

The Hi-VB will open its first shop facility on Circular Road in the centre of

Faisalabad city. Five more shops along a kiosk will be placed over the next three

years. The demographic and physical requirements for a shop location are:

Established retail shops in area.

Visible from roadway.

Easy access to commuters as well as people out for a drive

3.0 Products

The Hi-VB Shop will entice commuters to quench their thirst with freshly expelled

sugarcane juice, pure fruit ciders and juices, fruit cocktail drinks, fruit slushes,

specially blended fruit shakes, cold coffee and many more in Hi-VB Shop signature

pitchers and disposable glasses. During chilly season, Hi-VB Shop will offer specialty

coffees, blended teas, and other custom hot beverages. The fresh-cut fries, vegetable

rolls, meat rolls and selection of unique dipping sauces will also garland the venues.

3.1 Product Description

HI-VB offers its customers to order a beverage that will be blended to their exact

specifications. Each of HI-VB's Baristas will be trained in the fine art of expelling,

blending and serving the highest quality hot and cold beverages.

3.2 Competitive Comparison

The Hi-VB considers itself to be a player in the retail beverage industry. However, it

knows that competition for its products is offered by variety of competitors.

The Hi-VB's primary competition will come from three sources:

1. Soft drink sellers.

2. Locally owned and operated juices corners.

3. Fast food chains.

4. Sugar cane juice sellers

Few things will make The Hi-VB stand out from all its competitors:

The products are free from cola hazards

Larger serving than competitors i.e. 325ml.

Soothing environment for shoppers to take a break and get re-energised

Incorporation of nutrition products in range i.e. drinks for diabetics using

natural sweeteners

3.3 Future Products

As seasons change, The Hi-VB will be offering products that will enhance sales and

satisfy its customers' desires. During chilly winter months, HI-VB will subsidize

lower cold beverages sale with hot beverages i.e. coffee, tea, qahwa etc. Hi-VB will

also consider entering in the processing of packaged or bottled beverages. The Hi-

VB's primary desire will be to listen to its customers to ascertain what they are

looking for most, and provide it.

4.0 Market Analysis

4.1 Market Segmentation

Hi-VB will mainly focus on people visiting business place. The targeted customer

segments shall include commuters coming to markets for shopping or some other

purpose. The shop keepers from the vicinity of Hi-VB outlets. The service providers

approaching the market for business activities. The people out for a drive or window

shopping will be another focus of Hi-VB business. Another emerging segment will be

children accompanying their parents, they will also be offered the drinks of their

demand in the lucrative way. Moreover people avoiding extra calories will be served

their demanded beverages.

4.2 Target Market Segment Strategy

People out for some business activity are always in search of some decent place to

take rest, quench their thirst and reenergized to complete their remaining tasks. By

locating the Hi-VB Shop in popular market place, the customer will seek the Hi-VB

out and become regular guests.

The other target customer, the leisure visitor shall be offered a vast range of speciality

beverages. The children segment shall be offered special nutrition drinks with some

gifts of their choice e.g. toys, stickers. Properly highlighted display of the nutrition

aspect of the specialty beverages will assist to attract the health conscious personals.

4.2.1 Market trends

It has been long ago when the introduction of bottled cola beverages took lead over

indigenous drinks. Indigenous popular beverages e.g. sugarcane juice, skanjbeen,

sattoo have become neglected ones. Present era could be called as media age where

awareness of people regarding the role of polluted glasses in spread of communicable

diseases i.e. hepatitis, cholera etc and awareness regarding harms of cola beverages

and is elevating. Thus packaged fruit drinks and juices have been gaining popularity.

Yet the consumer thirst is huge for hygienic, fresh beverages. The options available

for them are limited. They have to purchase some bottled carbonated beverage, from a

cold corner or get a glass of juice from some juice corner. Fresh expelled sugarcane

juice is also available from road side “rahri walas”. The market is primed for the

introduction of a superior quality specially blended products in a hygienic, convenient

and peaceful environment at a price that is competitive to the all other beverage

options. The innovation in food proceeding sector offers great opportunities to

accomplish the goal. Life style has also been changing in Pakistan at fart pace. People

are ready to pay for a quality product and service.

4.2.2 Market Growth

According to industry statistics, the consumption of pure juice and flavoured dairy

products is growing rapidly. The segment of market what we are targeting is the

commuter and number is increasing. In the urban areas, there is an increase in

population coupled with migration of population. The improved transportation

facilities have made the market places more congested and populated offering a great

deal of improved business activities fetching high potentials.

4.2.3 Market Needs

Our consumers have a desire for quality at reasonable price. As much as they would

like to sit in a peaceful environment to fulfil their beverage needs. Moreover

awareness regarding communicable diseases have forced the consumer to avoid the

reusable utensils and largely shifted to disposable service cups.

4.3 Industry Analysis

The general juice sales have increased with various brands such as Nestle, Shezan and

Mitechells reporting higher sales and greater profits. The local consumers are heading

towards hygienically processed food and it’s the time to satisfy their demands and

needs and reap the rewards.

4.3.1 Competition and Buying Patterns

There are four general competitors. There is a dramatic distinction among the patrons

of each of these outlets. They are

Soft drinks are being sold at cold corners, pan shops, convenience stores, and

cafeterias. All these offer a minute or two stop for getting the desired bottle to

satisfy the thirst. Usually they have no facility to sit. Atmosphere is polluted

one.

Juice corners offer freshly expelled or packaged juice in a limited verity; often

they present milk shakes as well. They also have scarce sitting facilities.

Fast food chains offer limited branded beverages in variable serving sizes. The

environment is soothing while prices are high, not affordable by majority of

people visiting market place purposefully. However they have attraction for

leisure visitors. Moreover their main focus sale is the fast food not the

beverage.

Another competitor is the "rau" seller. They have the juice squeezer installed

on a cart. They could be mobile or permanently placed in some idle spot, near

a rush place. They offer freshly expelled sugar cane juice only. They seldom

have facilities for consumers to sit to take a little break. They offer their

products at cheaper rates.

4.3.2 Main Competitors

When measuring head-to-head, direct competitors, we have found that all these are

present in the business areas. There is significant competition from these traditional

retailers.

1. Soft drink corners ( cold corners)

The main competitors will be the cold corners selling carbonated beverage. Hi-VB

believers it has a significant competition advantage over these because of the

following reasons:

Healthy offering

Competitive prices

Products free from harms of cola

Soothing environment

Product’s variety

Quality of service

2. Juice corners

Juice corners are another big competitors, HI-VB has the edge over these based on the

attributes of:

Hygienic processing

Quality of service

Product’s variety

Comfortable environment

Availability of menu items even in off season.

3. Fast foods restaurants

Fast foods restaurants are the competitor for their similar service pattern. However

Hi-VB has following merits over these:

Product’s variety

Healthy offering

Presence within market area

Cheaper prices

4. Sugar cane juice expellers

Sugar cane juice expellers are the limited competitors for a single item. Hi-VB has the

advantages over them:

Hygienic processing of similar product

Versatility in sugar cane beverage product through blending

Quality of service

Long range of products

Snacks offered

Soothing environment

Good correlation of service to price

Other competition:

The Hi-VB knows that once it has entered the market and established a presence,

others will try to follow. However, Hi-VB believes that the corporate missions and

even the organizational design will be imitated, but never duplicated. Hi-VB will

constantly evaluate its products, locations, service, and corporate missions to ensure

that it remains a leader in the specialty beverage industry.

4.3.3 Industry Participants

There is no similar kind of business facility in Pakistan. Therefore the sense of being

pioneer in "value beverage" concept forces the company to stick to ethics of business

mission and follow a comprehensive quality policy.

5.0 Strategy and Implementation Summary

The Hi-VB will penetrate the market by deploying shop facilities and kiosks in the

most logical and accessible locations. The shops are designed to handle service and

take away orders and dispense customer-designed, specially ordered cups of specialty

beverages in comfortable environment within desired time limit set by the consumer

him or his self. The Hi-VB has identified its market as people with a desire for

refreshing, high quality beverage while commuting.

5.1 Strategy Pyramid

The Hi-VB's strategy is to show people that Hi-VB has an excellent product with

convenient environment and accessibility. To execute on this strategy, Hi-VB is

placing the shops and kiosks at easily accessible locations. Hi-VB is pricing its

product competitively and training the production staff to be among the best in the

country. Then, through multiple activities Hi-VB will highlight the nutritional

significance of its products. In so doing, Hi-VB has:

1. Provided a customer with a quality product at a competitive price.

2. Provided the customer with a convenient way for obtaining their desired product.

5.2 Value Proposition

The Hi-VB concept is that the customer places the order, receives high quality

products at a competitive price, having nice place to sit and drink. The Hi-VB

provides a substantial value proposition in that the customer receives hygienic tailor

made, refreshing fresh or processed beverages in the serving size of their choice in a

soothing environment with the satisfaction of getting maximum return to what they

have paid.

5.3 Competitive Edge

The Hi-VB's competitive edge is simple. Hi-VB provides wide range of high quality

products at a competitive price in a peaceful environment

5.4 Marketing Strategy

First and foremost, the Hi-VB will be placing its shop facilities in locations of very

high visibility and great ease of access. These will be located on high commuter rush

areas and close to shopping facilities in order to catch customers while they are out on

a shopping expedition. The outlooks are very unique and eye-catching, which will be

a branding feature of its kind. The Hi-VB will be implementing a low cost advertising

promotion campaign which could involve highlighted merits of hygienically process

quality beverages.

Opening

Expert industry insiders advise starting slowly, wowing every customer and building

rapport. Critical mass is certainly present to enjoy the service before it is fully open to

the public, and commuters will be able to enjoy their drink experience while the shop

optimizes performance and flow. Invitations will be sent to customers to preview

opening.

Public Grand Opening

Two weeks after the shop is open, the Hi-VB will hold a grand opening for the public.

Delay is due to the sense that the shop must be operating smoothly in order to best

serve the entire public. A grand-opening coupon or discount to entice people to come

try the beverage will be offered on a wider scale—offering a group discount to help

drive numbers higher. The grand opening will include a formal ribbon-cutting

ceremony and media campaign.

Announcing the Shop

Plans for announcing the opening of the shop include:

• Posting flyers in adjacent market areas

• Hanging a large banner on the building to show the shop is open

• Media announcements

• Securing endorsements from clients or other influencers

Word of mouth will be highly important in the marketing and communication of the

shop. Budget for expensive print ads or broadcast media is considered unnecessary as

the reach of the shop is initially small in scope (limited to certain market). Hi-VB will

rely on person-to-person contact to issue the message that the products are good and

affordable. Face-to-face sales and relationship marketing will be vital in retaining

customers and repeat business.

5.4.1 Distribution Strategy

The Hi-VB will locate shop facilities in market areas of the city where it knows

commuters will be facilitated.

5.4.2 Marketing Programs

5.4.3 Pricing Strategy

The Hi-VB pricing will be comparable to the competition, but with the value-added

feature of convenience serving and controlled atmosphere.

5.5 Sales Strategy

There will be several sales strategies put into place, including posting special offers

on market facing windows. The counter workers will also hand out free drink coupons

to those who have purchased a certain number of cups or something similar. HI-VB

will also develop window sales techniques such as the counter boy asking if the

customer would like a snack with their beverage.

5.5.1 Sales Forecast

In the first year, The Hi-VB anticipates having one shop location in operation. The

location will open in the third month of this plan and be fully operational beginning

on the 1st day of April. In the second year, The Hi-VB will add two more shops and,

in the third year, HI-VB will add an additional three facilities out of which one will be

a kiosk. The addition of these facilities will increase the revenue from shops with a

total of over in the second year and in the third.

Total first year unit sales should reach 298,402. The second year will see unit sales

increase to 1,177,400. The third year, with the addition of such a significant number

of outlets, we will see unit sales increase to 2,992,000.

5.5.2 Sales Programs

Corporate Tasting Events - HI-VB plans to host tasting events for customers on a

quarterly basis. Each quarter, at the introduction of each season, HI-VB will be

adjusting its menu to reflect the changes in the flavours served.

Drink Coupons - At fundraising events for schools and corporate events, we will be

giving away drink coupons as door prizes or awards. This encourages the person to

come in for their free beverage and bring a friend or buy a package of our premium

juices. The shops will also be distributing coupons for special menu items or new

product introductions.

5.6 Strategic Alliances

The Hi-VB has and will continue to depend heavily on our alliance with fruit

producers, fruit merchants, food machinery manufacturers and consumable products

providers. However, we will always be looking for better quality products, more

favourable pricing, or more timely delivery from other potential alliances. We also

consider the universities and even corporations who can host any one of our Kiosks as

strategic alliances. They will provide exposure to our products and we in return will

pay them a financial benefit as well as reliable service.

5.7 Milestones

The Milestone table reflects critical dates for launching the first and subsequent

shops, as well as deployment of the kiosk as well as occupying head office. The Hi-

VB also defines break-even month, our website launch and other key markers that

will help us measure our success in time and accomplishment.

Table: Milestones

Milestone Start Date End Date

Open First Shop 01/01/2010 20/3/2010First Break-even Month 01/11/2010 30/11/2010Open Second Shop 15/01/2011 01/04/2011Launch Website 15/04/2011 01/06/2011Open Third Shop 01/06/2011 01/09/2011Open Fourth Shop 15/01/2012 01/04/2012Occupy Head Office 01/06/2012 01/07/2012Open Fifth Shop 01/06/2012 01/09/2012Install First Kiosk 01/03/2012 01/06/2012Initiate Exit Strategy 01/6/2012 30/12/2012

6.0 Management Summary

The Hi-VB is a relatively flat organization. Overhead for management will be kept to

a minimum. There is no intention of having a top-heavy organization that drains

profits and complicates decisions. At the zenith of this three-year plan, there will be

four executive positions: chief operating officer, chief financial officer, chief

information officer, and director of marketing. There will be other mid-management

positions, such as area managers for every five shops and a facilities manager to look

after kiosk as well as overseeing the maintenance and replacement of equipment.

6.1 Management Team

The Hi-VB has selected Mr. Omer Mukhtar Tarar to perform the duties of Chief

Operating Officer. Mr. Tarar is professional food technologist and has spent nine

years in food and allied sector. He possesses a highly entrepreneurial spirit and has

worked in production management and quality control positions in Vita Pakistan and

Farmers Foods, Karachi. He has also hands on experience in research and

development field. Combine his experience, leadership, and desire with three years of

research back ground of new product development, HI-VB knows that Mr. Tarar is

the individual who can manage the company successfully. He will take lead to work

for selection and optimization of beverage formulations to making critical business

decisions after consultation with other partners.

Mr. Ejaz Ahmad being a professional food technologist and further a master in

marketing is deputed to act as director marketing as well as to look after finance as

well. He will be responsible for establishing inventory and warehouse policies.

Mr. Kashif Nadeem Bhutta has been selected to act as Area Manager from January

2011, till then he will perform the duties of shop manger. His role is quite critical as

he will have to lead the first shop to success, ultimately paving the way for future

expansion of business.

Mr. Waqas being a food technologist by profession has been assigned the job of

production management and inventory control. He will also be responsible for

selection of raw material and quality control of products. Waqas’s domain will be the

production unit.

6.2 Management Team Gaps

The Hi-VB knows that it is going to require several management team members over

the next three years, beginning with a competent shop manager. This person will

oversee the quality of product, the training of the counter staff, the inventory

management, and customer satisfaction. As the need arises, these individuals will

ideally be selected from the shop team. After establishing head office, the Hi-VB will

hire accounts persons.

6.3 Organizational Structure

The organization will be a relatively flat one, as the majority of personnel are

involved in service and production and there will be a relatively low headcount in

management. There are three functioning groups within the company: Production,

Sales and Marketing, and General and Administrative. Production involves the labour

working under the supervision of production manager, who will be manning the

production house. The counter boys will prepare beverages for the customers. Sales

and marketing will handle the shops. General and administrative manage the facilities,

equipment, inventory, payroll, and other basic, operational processes.

6.4 Personnel Plan

The Hi-VB expects the first year to be rather lean, as there will only be one

operational location. The total headcount for the first year, including management,

administrative support, and customer service (production), will be 8. The second year,

with the addition of another two shops will add three shop mangers, one for each

shop. The headcount will increase by over 100% in the second year to 20, with a

proportional increase in payroll burden. During the third year, due to the addition of

two more shops, a kiosk and establishment of head office, new staff will largely be

hired as well as production staff will also be increased by 50%. In the third year, there

will be a total increase of 100% over the previous year. Total personnels will reach to

48.

Table: Personnel

Personnel Plan FY 2010 FY 2011 FY 2012

Production Personnel

Production House Team 120000 132000 190000

Equipment Care Technician 0 0 0

Subtotal 120000 132000 190000

Sales and Marketing Personnel

Area Manager 0 0 0

Shop Team 444000 1465400 2920400

Manager Marketing 0 0 0

Subtotal 444000 1465400 2920400

General and Administrative Personnel

Bookkeeper/Office Administrator

0 0 132000

Warehouse/Site Manager 0 0 132000

Inventory Clerk 0 0 96000

Subtotal 360000

Total People 8 20 40

Total Payroll 564000 1597400 3470400

7.0 Financial Plan

The Hi-VB's financial picture is quite promising. HI-VB is operating a cash business;

the initial cost is significantly less than many start-ups these days. The process is

labour intensive and HI-VB recognizes that a higher level of talent is required. The

financial investment in its employees will be one of the greatest differentiators

between HI-VB's and its competitors. There will be a minimum of inventory on hand

so as to keep the product fresh and to take advantage of price drops, when and if they

should occur.

The Hi-VB anticipates the initial combination of investments and long-term financing

to carry it without the need for any additional equity or debt investment, beyond the

purchase of equipment or facilities. This will mean growing a bit more slowly than

might be otherwise possible, but it will be a solid, financially sound growth based on

customer request and product demand.

7.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the

following table. The key underlying assumptions are:

The Hi-VB assumes a slow-growth economy, with indicators of recession.

The Hi-VB assumes access to equity capital and financing sufficient to

maintain its financial plan as shown in the tables.

7.2 Key Financial Indicators

The following chart shows changes in key financial indicators: sales, operating

expenses, collection days, and inventory turnover. The growth in sales exceeds % in

second year. HI-VB expects to keep gross margin above the % projected for the first

year. The projections for inventory turnover show that HI-VB will maintain less

amount of inventory in its warehouse in order to keep products fresh.

7.3 Break-even Analysis

To arrive at the average monthly fixed costs, Hi-VB calculated the fixed costs for the

shop. Using the average price per unit, less the average variable cost per unit, divided

into the fixed costs of operation, HI-VB concludes that we will need to sell at least

93850 units to reach break-even as shown in the following table.

Table: Break Even Analysis

FY 2010 FY 2011 FY 2012Sales price per unit Rs. 20.5 Rs. 20.55 Rs. 20.95Total fixed cost Rs. 1244280 Rs. 3285904 Rs. 6673483Variable cost per unit Rs. 7.24 Rs. 7.26 Rs. 7.25Unit contribution margin 13.26 13.24 13.25Break even in units 93850 248158 503792Break even sales level Rs. 1923927 Rs. 5087236 Rs. 10327738

7.4 Projected Profit and Loss

The Hi-VB is expecting to meet break even point by the end of the first year Net

After-tax profit is given in table. A rapid growth in the year three, reaching healthy

sales is also evident here. Aside from production costs of 28%, which include actual

ingredient cost, the single largest expenditures in the first year are in the general and

administrative area, totalling 48% of sales. General and administrative area includes

expenses for rents, utilities, and the payroll burden for all employees. Sales increase

by nearly 189% in the second year, due to the addition of two more shops. Although

operating expenses elevated sharply in the second year, Hi-VB will be able to realize

a Net After-tax profit. The third year is when Hi-VB has the opportunity to diversify

its business by opening a kiosk at some suitable location. HI-VB will see two more

shops open in the third year, which will drive sales; increase in production costs.

Several expenses take substantial jumps this year--advertising increases and HI-VB

will be adding several new management team members. The single largest expense

sector in the third year, outside of production, is still general and administrative costs,

but it is down from 48% in the first year to 43% in third year.

Table: Projected Income Statement

FY 2010 FY 2011 FY 2012

Sales 2258875 6528000 13694125

Cost of goods sold

Direct Material 628050 1835400 3843425

Direct labour 444000 1465400 2920400

Direct operating expense 150000 420000 820000

Total cost of goods sold 1114611 3457508 7050694

Gross profit 1144264 3070492 6643431

Operating expenses

Indirect labour 20000 50000 120000

Marketing expense 100000 150000 250000

Depreciation 170280 445504 868083.2

Rent 480000 1130000 2255000

Administrative cost 0 0 180000

Overhead 50000 95000 200000

Total Operating Expenses 820280 1870504 3873083

Net income before tax 323984 1199988 2770348

Taxes incurred Tax performa required

Net Profit

7.5 Projected Balance Sheet

The Hi-VB's projected balance sheet shows an increase in owner’s equity in 2012, at

which point it expects to be making 11.96% after-tax profit on sales. With the present

financial projections, HI-VB expects to build a company with strong profit potential,

and a solid balance sheet that will be asset heavy and flush with cash at the end of the

third year.

Table: Balance Sheet

FY 2010 FY 2011 FY 2012

Current Assets (in Rs.)

Cash 234000 456000 655000

Inventories 154540 266356 665890

Pre paid rent 240000 690000 1230000

Total Current Assets 628540 1412356 2550890

Fixed Assets

Equipment 223400 646400 1158400

Less cumulated depreciation  44680 165024 363699.2

Vehicle 350000 350000 350000

Less cumulated depreciation 70000 126000 170800

IT Supplies 120000 320000 620000

Less cumulated depreciation 39600 95680 200544

Furniture and fixtures 80000 230000 430000

Less cumulated depreciation 16000 58800 133040

Total Net Fixed Assets 603120 1100896 1690317

Total Assets 1231660 2513252 4241207

Liabilities and Owner’s Equity

Current Liabilities

Accounts Payable 185500 278900 656000

Total Current Liabilities 185500 278900 656000

Owners Equity 1046160 2234352 3585207